In Switzerland, a sole proprietorship, a limited liability company (LLC, known as a Sàrl or GmbH) and a limited company (SA or AG) are three legal structures to consider when starting a business. To choose your company’s legal form, focus on the risks, the people involved and your financing needs.
A sole proprietorship makes it straightforward to start on your own. An LLC lets you operate through a separate company, alone or with partners. A limited company deserves particular attention when share ownership and investors play an important part. Here is how to assess your project before exploring the two most relevant options in more detail.
Six questions about your business
Think about your team, activity, personal circumstances, available capital, protection needs and future plans. The criteria below explain how these answers affect your choice.
Our free interactive questionnaire covers these six areas. The questionnaire is currently available in French. It offers initial pointers rather than a definitive legal or tax recommendation.
Open the free questionnaire (French)Prefer a direct comparison? See the sole proprietor, LLC and SA table ↓
What is a business’s legal structure?
The legal structure, or legal form, is the legal framework within which you conduct business. It determines, among other things, who owns the business, who is responsible for its debts and how it is organised.
Distinguish the legal form from the business’s name and activities. A shop or consultancy, for example, can operate as a sole proprietorship, an LLC or a limited company. Business size alone therefore does not determine its structure.
The main business legal structures in Switzerland
| Criterion | Sole proprietorship | LLC (Sàrl/GmbH) | Limited company (SA/AG) |
|---|---|---|---|
| Owners | One individual | One or more members | One or more shareholders |
| Minimum capital | No statutory minimum | CHF 20,000, fully paid up | CHF 100,000 subscribed; at least 20% of each share and CHF 50,000 in total paid up |
| Business debts | The owner is personally liable | In principle covered by company assets | In principle covered by company assets |
| Purpose of the structure | Operate in your own name through a simple structure | Organise a business within a separate legal entity | Structure share ownership and prepare for investment |
| Accounting | Simplified below CHF 500,000 turnover; full accounts from that threshold | Full accounts | Full accounts |
These points do not replace an assessment of your project. Personal guarantees, directors’ duties and obligations in the articles of association must also be considered.
Choosing your legal structure in Switzerland
Romain Prieur explains the available structures and the questions to consider before starting your business.
Considering an LLC? Read about the requirements, capital and procedure in our article on forming a Swiss LLC.
Six criteria for choosing your legal structure
1. Risks and commitments
List what you will have to pay even if sales are delayed: rent, wages, stock, loans or long-term contracts. Include the possible consequences of a professional error or dispute.
As a sole proprietor, you are personally liable for business debts. An LLC or SA separates company assets from private assets. That separation does not remove a personal guarantee you have signed or potential liability as a director for breaching your duties.
The question to ask: what loss could you bear if the business does not perform as expected? Consider the legal structure and insurance together.
2. The people who will own the business
A sole proprietorship has one owner. Sharing ownership of the same business requires another structure. Both an LLC and an SA can have several owners, but either may also be owned by one person.
If you are starting with others, discuss decisions, remuneration, contributions and the possible departure of a partner now. A disagreement on these points is not resolved simply by choosing a legal label. Our article on choosing a business partner sets out the discussions to have first.
3. Funding the launch and growth
Prepare a cash flow budget. How much will you need to start, pay expenses and wait for the first customer receipts? The legal minimum says nothing about the amount your project actually needs.
Both an LLC and an SA can admit equity investors. An SA is often worth considering when several funding rounds or transfers of shares are planned. An LLC can nevertheless admit a new member too.
Our article on share capital in Switzerland distinguishes subscribed capital, paid-up capital and formation costs.
4. Your social insurance protection
For a sole proprietor, the compensation office assesses self-employed status according to the actual working arrangements. A contract labelled “self-employed” or an entry in the commercial register does not guarantee that status.
A person working for their own LLC or SA and receiving a salary generally falls under the employee social insurance system. This does not automatically confer entitlement to unemployment benefits: a management position or influence over company decisions may prevent a claim.
Before choosing, also review your pension provision and income protection in the event of accident or illness.
5. Tax and your disposable income
In a sole proprietorship, business profit forms part of your personal taxable income. In an LLC or SA, the company pays tax on its profit; your salary and any dividends are dealt with at your personal level.
Economic double taxation concerns, in particular, profit distributed as dividends. A commercially justified salary is generally a company expense, so salary and dividends should not be presented as identical mechanisms.
Compare scenarios using expected profit, your private income needs, social contributions and tax circumstances. Turnover alone cannot identify the most advantageous structure. Our article on Swiss business taxes explains these mechanisms.
6. Everyday administration and succession
A sole proprietorship still has accounting obligations. Below CHF 500,000 in annual turnover, it must at least record receipts, expenditure and assets. From that threshold, full accounting rules apply. LLCs and SAs keep full accounts and must also organise decisions by their corporate bodies.
Look several years ahead. Do you want to remain the sole owner, pass the business to a relative or sell it? Anticipating this path avoids choosing solely on the basis of first-year costs.
Which structure suits your business?
Review your risks, funding and circumstances with a Swiss-qualified accountant. A personalised 30-minute consultation costs CHF 89 including VAT.
Book my consultationWhich option should you explore for your project?
The following situations illustrate a way to approach the decision. They are not automatic recommendations by profession.
You are testing an activity alone with few fixed costs
Start by considering a sole proprietorship. Check that your working arrangements meet the self-employment criteria and that the risks remain manageable. A consultant may have few expenses while still taking on substantial professional liability.
If your main concern is separating business and private assets, continue with our sole proprietorship or LLC comparison.
You are starting with partners or significant commitments
An LLC is an option to examine: it allows ownership interests to be allocated and business to be conducted through a separate company. For a shop, agency or employer, pay particular attention to contracts and cash requirements.
Our article on forming a Swiss LLC explains the requirements and steps.
You are preparing to bring in investors
Consider an SA if share ownership is expected to change regularly. Ask prospective investors about their expectations before incorporating. Your choice should support the project’s financing and governance.
Our LLC or limited company comparison examines ownership interests, transfers and organisation.
Sole proprietor or LLC: compare before you start
Liability, tax, social insurance and formalities: review the key differences between these structures, including a section for cross-border workers. This resource is in French.
Get the free French white paperWhat other business structures exist in Switzerland?
A general partnership (SNC in French) allows several individuals to run a business together but involves personal, joint and several liability. Each partner’s commitments therefore require careful consideration.
A cooperative or association serves different project purposes. A sole proprietorship is the activity of an individual: it is neither a separate legal entity nor a company formed by several people. For a conventional commercial project, starting with sole proprietorship, LLC and SA helps focus the comparison.
Your structure can evolve with the business
You can begin with one structure and change your organisation later. Moving from a sole proprietorship to a company requires preparation for transferring the business, assets, liabilities and contracts. It is not simply a change of name.
Converting between an LLC and an SA follows a different procedure. In every case, plan for the tax consequences, funding and formalities before proceeding.
From choosing a structure to starting your business
Before beginning the formalities, write down your activity, intended owners, main risks, available funding and the income you need on one page. These points make the decision much more concrete.
Still deciding?
Compare the two options that best fit your project:
Ready to proceed?
Our team can help you prepare your next steps and start your business.
Which structure suits your business?
Review your risks, funding and circumstances with a Swiss-qualified accountant. A personalised 30-minute consultation costs CHF 89 including VAT.
Book my consultationFrequently asked questions about legal structures
What is the difference between a legal form and a legal structure?
In this context, both expressions generally refer to the legal framework of the business: sole proprietorship, LLC, SA or another structure. The trading name and business sector are separate matters.
Which structure should I choose when starting alone?
A sole proprietorship can suit a launch with few financial commitments. An LLC or SA is also possible with a single founder. The choice mainly depends on risks, available resources and development plans.
Can I start a business without minimum capital?
Yes. A sole proprietorship has no statutory minimum capital. You still need to fund startup expenses and the first months of activity. An LLC or SA requires minimum capital.
Must I form an LLC once turnover reaches CHF 100,000?
No. This is not a threshold for conversion to an LLC. It is relevant, in particular, to commercial registration requirements for sole proprietorships. VAT obligations must be assessed separately.
Does an LLC always protect private assets?
The company is in principle liable for its debts with its own assets. Personal commitments, such as a guarantee, or liability for a breach of management duties may still expose private assets. The articles of association may also provide for additional contributions.
Is an SA only for large businesses?
No. A small business may also choose an SA. It can be particularly relevant when ownership arrangements, succession or bringing in investors are important to the project.
Which structure pays the least tax?
There is no answer that applies to every entrepreneur. The comparison must consider expected profit, remuneration, social contributions, the canton and private circumstances. Turnover alone cannot determine the answer.
Can a sole proprietor hire employees?
Yes. A sole proprietorship can employ staff. Its owner must then meet the obligations of an employer. Being the sole owner does not mean having to carry out all the work alone.
Can I change the legal structure later?
Yes, but the steps depend on the starting point. Moving from a sole proprietorship to an LLC involves forming the company and transferring the business. Conversion between an LLC and an SA follows another procedure. Contractual and tax consequences require preparation.
Official sources
This article draws on the Swiss Code of Obligations, the SECO SME portal’s legal-structure criteria (French), its information on limited companies and the OASI/DI factsheet on self-employed status (French).
Romain Prieur is a Swiss certified public accountant and the founder of Entreprendre.ch. With more than ten years of experience in auditing and supporting businesses in Switzerland, he advises entrepreneurs on company formation, accounting and taxation.
